What is a main residence exemption valuation?
A main residence exemption (MRE) valuation is an independent market value report prepared as at the date a property's CGT status changes — typically the first day it is used to produce income, the date of inheritance, or the date the six-year absence rule expires. Under s118-192 of the ITAA 1997, the property is deemed to have been acquired at market value on that date, fixing a new cost base for any future sale.
"The first element of the cost base and reduced cost base of the dwelling is its market value at the time it is first used to produce income."
The s118-192 'home first used to produce income' rule
If you start renting out a property that was previously your main residence, s118-192 ITAA 1997 deems you to have acquired it at its market value on the date it was first used to produce income. This single date can save — or cost — tens of thousands in CGT, but only if it is supported by a defensible valuation. We prepare a market valuation effective on that exact date, fully ATO-compliant and signed by a Certified Practising Valuer.
Apportionment valuations
Where a property has been partly used to produce income — for example a portion of the floor area run as a home office, a granny flat rented through Airbnb, or a duplex with one half occupied — the gain must be apportioned. We provide:
- Floor-area apportionment with measured plans.
- Time-based apportionment for periods of rental.
- Combined area-and-time apportionment where both apply.
- Documentation supporting the percentage exempt and the percentage taxable.
The six-year absence rule
Section 118-145 ITAA 1997 lets you continue to treat a former home as your main residence for up to six years while it is rented. A valuation is needed when the absence period is exceeded, when the rule is renewed by re-establishing residence, or when another CGT event occurs during the absence.
Inherited main residence
When a main residence is inherited, the beneficiary inherits a cost base of market value at the date of death (for pre-CGT properties) or the deceased's cost base (for post-CGT properties), with a two-year window in which the property can be sold fully exempt. A date-of-death valuation locks in that cost base and removes uncertainty.
MRE trigger events at a glance
The most common scenarios that require a main residence exemption valuation:
| Event | Section | Valuation date |
|---|---|---|
| Home first used to produce income | s118-192 | Day income production began |
| Inherited main residence (pre-CGT) | s128-15 | Date of death |
| Six-year absence rule expires | s118-145 | Date the six years ended |
| Partial main residence (area) | s118-190 | Date of disposal — for apportionment |
| Property ceases to be MRE | s118-110 et seq. | Date status changed |
How it works — five steps
- 1
Brief & quote
Email the property address, the relevant date, and a short note on the purpose. We return a fixed-fee quote within 2 business hours for main residence exemption valuations.
- 2
Inspection
A Certified Practising Valuer (API) attends the property for an internal and external inspection. Tenanted properties are coordinated directly with the occupier.
- 3
Comparable sales analysis
We research settled sales using RP Data, Pricefinder, APM and council records, applying the direct-comparison and (where relevant) capitalisation approaches.
- 4
Report drafting
The report is drafted to API Professional Practice Standards and the ATO Market Valuation Practice Instruction (MVPI), with full comparable schedules and signed certification.
- 5
Delivery
The signed PDF is delivered to you and (on request) directly to your accountant, solicitor or auditor within 5 business days of inspection.
Glossary
Plain-English definitions of the terms used in this report and in related ATO guidance.
- Main residence exemption (MRE)
- Subdivision 118-B ITAA 1997 — generally exempts a capital gain or loss on a dwelling that is the taxpayer's main residence for the entire ownership period.
- Home first used to produce income
- The s118-192 rule deeming a former main residence to have been acquired at market value on the day income production began.
- Six-year absence rule
- Section 118-145 — allows a former home to continue to be treated as a main residence for up to six years while rented, indefinitely if not rented.
- Apportionment
- Calculating the percentage of a capital gain that is taxable where a property has been partly used to produce income, by area and/or by time.
- Two-year disposal window
- Section 118-195 — an inherited main residence can be sold fully exempt within two years of death (extendable on application).
- Reduced cost base
- The amount used to calculate a capital loss (Division 110). Differs from the cost base in that it excludes some indexation and holding costs.